Ciena Corp (NYSE:CIEN) stock fell 1.70% (As on June 13, 11:16:45 AM UTC-4, Source: Google Finance) as Morgan Stanley upgraded the optical networking company, citing a “derisked” environment for fiscal 2024 and there is a potential for upside in fiscal year 2025. Morgan Stanley adjusted its stance on the stock, raising the stock’s rating from Equalweight to Overweight and increasing the price target to $55 from $53. The analyst noted that prior to the fiscal quarter two (FQ2) earnings report, there were concerns regarding the Street’s estimates, which anticipated a significant pickup in growth in the second half of the year. These estimates assumed a double-digit sequential growth in fiscal quarters three and four, dependent on an upturn in the telecommunications market.
Morgan Stanley has since revised its full-year revenue estimate for CIENA downwards by approximately 4% to reflect ongoing inventory adjustments and sustained caution from international customers due to macroeconomic factors. The firm believes that with these revised expectations, CIENA’s current valuation is more reasonable.
Despite the revision, Morgan Stanley remains optimistic about CIENA’s performance for the remainder of the year. The firm acknowledges that a roughly 23% sequential increase in fiscal quarter four (FQ4) will be necessary to meet the full-year objectives.
However, the analyst points out that telecommunications orders and revenue have already shown sequential improvement in FQ2. Additionally, strong cloud engagement is expected to continue, particularly in the second half of the year compared to the first half, and the company still has a backlog of about $1.9 billion.
In other recent news, Ciena Corporation faced a significant reduction in its shares target from CFRA due to slower market recovery. The company’s April quarter financial performance unveiled an operating EPS of $0.27, surpassing the consensus by $0.16, but significantly lower than the previous year’s $0.74 due to a 19.6% decrease in quarterly revenue. Analysts from Argus, B.Riley, Needham, BofA Securities, and Stifel maintained their Buy ratings on Ciena, underlining the company’s potential for recovery and growth. Ciena’s management remains optimistic about the potential impact of AI traffic on its revenue stream and expects its upcoming WaveLogic 6 Nano products to drive future growth. B.Riley reduced its price target for Ciena shares to $66 from the previous $68, while Needham adjusted its price target for Ciena shares to $60 from the previous $65. Despite the adjustments, both firms maintained a Buy rating on the stock. In other recent developments, BofA Securities maintained its Buy rating on Ciena with a steady price target of $59.00.